Concrete Economics: The Hamilton Approach to Economic Growth and Policy

Murn, Charles, The Humanist

Concrete Economics: The Hamilton Approach to Economic Growth and Policy

by Stephen S. Cohen and J. Bradford DeLong

Harvard Business Review Press, 2016

240pp.; $28.00

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Concrete Economics: The Hamilton Approach to Economic Growth and Policy, by Stephen S. Cohen and J. Bradford DeLong, is a quick, easy, and provocative read for a someone with knowledge of history, economics, and, surprisingly, humanist philosophy. In an era in which Charles Koch is expanding his heavy funding for research to prove free markets and deregulation produce the fastest advancements in human wellbeing, it's a welcome reminder of the US economic policy framework that created the middle class. Unfortunately, it also captures a fair snapshot of how the two-party system in the United States has, of late, completely failed the middle class.

The book tells two different stories. One is a brief history of US economic public policy. The other is how some other countries copied the best of that policy to advance their economy and middle class.

Alexander Hamilton, the first US Secretary of the Treasury, is at the center of the first story. The authors astutely point out how pivotal Hamilton's work and economic theory were to setting the course of the US economy from the earliest days of our federation. His theory was expressed to Congress in 1791 in his Report on Manufacturers. The authors rightly state that despite the importance of this report in US economic history and theory, it "is not core curriculum, or even marginal curriculum in core American and British economics departments."

In his report, Hamilton set forth the essence of policy necessary to defend nascent US industry against the economic power of the British Empire. In economic terms, it had the goal of protecting early US industry from being priced out of the market by British producers with deep pockets. In short, it called for tariffs, infrastructure spending, subsidies for promising industries, a central bank, and the establishment of a market for federal debt via assumption of states' debt from the Revolutionary War.

Hamilton's policies and the theory on which they were based resulted from a functional analysis of what the US economy needed. The authors call his approach "pragmatic." They cite Teddy Roosevelt, Franklin Roosevelt, and Dwight Eisenhower as presidents whose administrations improved upon Hamilton's basic structure for the economy.

Interestingly, the authors characterize Franklin Roosevelt's approach in the New Deal as "pragmatic experimentalism." That phrase is, for some philosophers, another name for humanist philosophy. To find it used in a book on core US economic policy reflects recent advances in understanding about the natural usefulness of the humanist approach. Roosevelt's team analyzed the Great Depression, considered the needs of various economic actors in the economy, and set an appropriate course, not knowing for sure whether it would work. In short, that's pragmatic experimentalism. One could also apply the phrase to the response by Barack Obama's Treasury Department and the Federal Reserve Bank to the 2008 financial crisis (to the extent that Republicans in Congress did not hinder them).

Eisenhower kept the New Deal and high income tax rates, pushed the interstate highway system and housing subsidies, and expanded government funding of basic research that led to another technology boom post-World War II.

All told, Concrete Economics affirms the idea that the United States has always had an industrial policy, such as it has been. Sadly, the authors refrain from using the phrase "industrial policy," probably because it's about as taboo a phrase in the nation as is "secular humanist." The fact of the matter is that the best industrial policy is pragmatic experimentalism. The authors do highlight that noteworthy results of US government subsidies include interchangeable parts, mass production, transcontinental railroads, and large manufacturing corporations. …

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